17 February 2016
BASF is to focus its coatings operations more strongly on its core automotive business following an agreement to sell its industrial coatings operations to AkzoNobel, the Germany-headquartered chemicals producer has said.
AkzoNobel is to acquire the unit, which comprises BASF’s coil, furniture foil and panel coatings operations, for €475m, with the deal expected to close in the second half of 2016.
The transaction includes include technologies, patents and trademarks, as well as production sites in Deeside, UK, and Vanderbijlpark, South Africa.
“With this transaction, BASF will further strengthen its focus on its core automotive OEM and automotive refinish coatings businesses as well as the leading decorative paints business with its brand Suvinil in Brazil,” BASF said.
The sale price is in line with analyst forecasts, defying assertions from some sources that the business would go for less as a result of the markets it serves taking a bearish turn. The unit generated revenues of €300m in 2015, according to BASF.
The company does not include a breakdown of coatings division sales by end market, but the industrial arm is understood to have generated stronger revenues in recent years.
“The price is not a bargain but okay in contrast to other multiples paid recently in the chemicals space,” said Baader Bank analyst Markus Meyer.
“In our view, this deal is a win-win situation for Akzo and BASF as the coil coating business is sub-critical for BASF and fits very well to Akzo’s portfolio,” he added.
The decision to sell was motivated by BASF’s lack of a market-leading position in industrial coatings, according to Warburg Pincus analyst Oliver Schwarz.
“The rationale behind [the sale] is that BASF doesn’t seem to feel that it has critical mass in the business. It claims to be number three in Europe, but is way off from [that] when it comes to global production of coil coatings,” Schwarz told ICIS last week when Akzo first officially confirmed the talks.
Part of BASF’s functional materials division, coatings generated €3bn in revenues for 2014, with the bulk of sales generated from the automotive sector.
The industrial coatings business is a much better fit for AkzoNobel, which derives almost half its revenues from the space.
“Coil coatings would fit perfectly with the coil coatings activities AkzoNobel already has, because that is very much attached to the construction coatings that they offer,” Schwarz said.
“This proposed acquisition will strengthen our position in the important coil coatings market and fits well with our existing business, allowing us to offer essential solutions to our customers," said AkzoNobel CEO Ton Buchner.
Buchner stated at a press conference last week that the company has earned the right to pursue bolt-on acquisitions, following several years of restructuring.
Additional reporting by Nurluqman Suratman